Affine‐Structure Models and the Pricing of Energy Commodity Derivatives

Abstract

Abstract We consider a seasonal mean‐reverting model for energy commodity prices with jumps and Heston‐type stochastic volatility, and three nested models for comparison. By exploiting the affine form of the log‐spot models, we develop a general valuation framework for futures and discrete arithmetic Asian options. We investigate five major petroleum commodities from Europe (Brent crude oil, gasoil) and US (light sweet crude oil, gasoline, heating oil) and analyse the effects of the competing fitted spot models in futures pricing, Asian options pricing and hedging. We find evidence that price jumps and stochastic volatility are important features of the petroleum price dynamics.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 21 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.